The aim of this case study was to further analyse the impact of the compensatory allowance at different fields of agriculture and rural development in a 'typical' less favoured area, the southern Bavarian region, Oberallgäu. Available statistics, relevant literature and data obtained from the German Test Farm Network (Testbetriebsnetz) were analysed, and interviews held with farmers and experts. At a later date, another survey was conducted with agricultural consultants in structurally similar regions to verify the transferability of the case study results. Finally, all results were presented and discussed in a workshop with experts on state and federal level. Overall, the objectives of the compensatory allowance for Less Favoured Areas were achieved in the case study region. With respect to design of the measure, it became evident that the disadvantages in this typical mountainous region result more from altitude - and therefore climate - and gradient than from soil quality. These criteria should thus be given more weight when the premium is determined. Such adjustments could potentially reduce the occasional over- or under-compensation effects. An increase of payments in the Bavarian mountainous regions does not at this time seem to be appropriate, despite the fact that this would be possible in the context of the ELER regulations.